First time buyers: how do you become a first time buyer?

At some point in your life you may want to settle down by becoming a first time buyer, but it can be very confusing trying to find the right mortgage.  To make matters worse, first time buyers are becoming more pressured financially. 

It is estimated that house prices have risen by 185% since 1995.  The affect that this has had on first time buyers should not be understated.  Due to high priced mortgages, the average age of first-time buyers has risen from 25 to 34 years, and during the past year (2006) the number of first time buyers has dropped from 38% to 35% of all buyers.  The average first time buyer paid 3.21 times their income to get a mortgage in June 2006 - the highest figure on record - according to new data from the Council of Mortgage Lenders (CML). 

But it’s not all doom and gloom.  First time buyers are a much needed part of the mortgage market, so lenders are doing as much as they can to encourage them.  It may be reassuring for you to know that the Council of Mortgage Lenders confirmed that the number of first time buyers taking out mortgages has risen from 34,900 in August 2005 to 38,100 in August 2006.

As a first time buyer looking for a mortgage, you may wish to explore turning to your parents or other family for help.  For example, your parents may be willing to help you find the money for a deposit.  Parental help with deposits has become more popular amongst first time buyers, with parents now contributing an average of almost £18,000 to help their children onto the property ladder, so a survey in August 2006 by Alliance & Leicester suggested. 

Besides help with the deposit, you could also consider asking your parents to be a guarantor for your first time buyer mortgage, whereby a nominated parent or guardian is responsible to pay your mortgage should you struggle to make the payments.  Guarantor mortgages provide a valuable safety net for struggling first time buyers.

But what if you are not in a position to obtain parental help? You could always consider living with a stranger, a method which is growing in popularity.  There are online organisations now that will help you find another would-be first time buyer who might be suitable for you to buy with.  You can choose to take part in ‘dates’ with prospective first time buyers to find out if you are a good match before pulling resources in order to buy together. 

If money is scarce and you have a friend or family member whom you would like to live with, then there is always the possibility of setting up a shared ownership mortgage, whereby you own up to 50% of the property.  It is also possible for up to four first time buyers to share a mortgage between them, making the mortgage a lot more affordable.

When it comes to mortgages, one of the most popular choices for first time buyers is a fixed rate.  With a fixed rate loan, the interest rate on the mortgage remains the same for a set period of time – 2 years for example – which enables you to budget effectively.  After the fixed rate is up, it is prudent to remortgage to a more competitive rate rather than pay the lender’s higher standard variable rate.

There are ways for first time buyers to get on the property ladder; it’s just about knowing all the options available to you.  It is also important for first time buyers to be fully aware of the financial implications of taking out a mortgage.  It is beneficial to seek professional advice, particularly advice that doesn’t cost you money.  Look for a reputable no fee mortgage broker like L&C that will not charge you for advice.  

For further information for first time buyers, why not download our easy guide to first time buyer mortgages or forward the link to a friend who might be interested.  Alternatively, call now for expert free advice.

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